Renovations

While several factors must come together for a property to provide consistent cash flow, none is more important than the renovation, which sets up the property for long-term success. While it is easy to be captivated when evaluating the sheer purchase price vs. cash flow numbers of a deal, those numbers become unachievable without a solid rehab designed to reduce vacancy and maintenance. Equity achieved by doing the bare minimum will typically be taken back in the form of reduced cash flow through excessive maintenance and vacancy. A property with $15,000 in equity with a 10-year-old roof, HVAC system, carpet and fuses (instead of breakers) should not be compared to the same exact property that is sold for $15,000 more, but has a new roof, new HVAC, vinyl plank flooring and updated electrical panel. The more expensive property will always be more profitable as deferred maintenance on capital expenses will eat up years in cash flow. When you have a property where capital expenses are deferred for 15 to 20 years, then you have the option to refinance and draw equity out of your home to do those improvements.

Our renovations focus on increasing cash flow by addressing deferred maintenance, replacing items on the back end of their lifespan, adding upgrades that are more tenant-resistant, and providing a great-looking property that people will see online and want to move into.

Here are just a few standard items addressed in our rehab that reduce maintenance:

High-Traffic Areas: We use vinyl plank flooring instead of carpet in high-traffic areas. While the cost of vinyl plank is greater, it will last much longer than carpet as it is highly water-resistant and durable. Investor-grade carpet can be ruined on the first tenant turn if the tenant is hard on the carpet and spills heavily-staining liquids.

Roofs: If a roof appears to have less than 10 years of remaining lifespan, we replace it. This is the largest capital expense you will face. Even with our volume discounts on shingles and leveraged volume cost to our roofers, roofs cost about $110 a square to install. With an average roof being 35 squares, you are looking at an approximate replacement cost close to $4,000.

HVAC Systems: AC systems are run far more frequently than furnaces. We typically replace AC units around the 10- to 12-year mark. Furnaces can last much longer than AC units in the South and we determine the condition of the furnace upon acquisition.

House Exterior: Many investors do not consider items on the home’s exterior, but these absolutely must be maintained by the landlord. We look at external structures that are past their lifespans and remove them so that you are not paying for it later. Fences are repaired or replaced and low-lying tree branches that could fall off and hit the house are also removed. Some of the largest repair bills aside from roofs relate to the outside of the home.

Electrical Panels: Fuse boxes must be updated to breakers as the power usage is significantly increased these days with laptops, smart phones, tablets, printers, flat screens in every room, etc.

The above items are great for reducing maintenance, but we also add features to improve the look of the property so that tenants will see it online, schedule an appointment, and want to make that house their home. Some of these items include:

New Countertops: Most homes receive new laminate countertops, but in select areas, we install granite. These are typically “A” class properties.

Ceramic Tile: This is often installed in bathrooms and kitchens. In the bathroom we will add an accent for a more modern look, along with a brushed nickel showerhead. This flooring in the kitchen is much more durable. Upon the first tenant turn, vinyl can look aged.

Vanities: Several vanities receive new countertops or new vanities altogether, finished off with a brushed nickel designer faucet.

Ceiling Fans: A lot of investors will add the cheapest fans offered by big box retailers. We choose to upgrade to nicer fans and add them in the kitchen, main living area and master bedroom. The other rooms are typically outfitted with oil bronze lights.

Exterior: Most houses receive a coat of paint, landscaping and new mailbox. During summer, we will treat the weeds to give the home a cleaner look, and add mulch and shrubs along the front. We also pressure wash the walkways leading up to the house, as first appearances mean everything. Tenants will look at several homes before making a decision; making them as nice as possible makes a big difference.

The items above are just a few of the efforts we conduct with our rehabs. As you browse our site, see if you can spot other details that make our homes stand out!

Remember the rule of thumb, “it is expensive going cheap,” and make sure your home is positioned for success on the front end.